In one of his first acts of office, U.S. President Joe Biden has issued an executive order that effectively kills the Keystone XL pipeline project.

The order states that the pipeline “disserves the U.S. national interest” and that approving it would be inconsistent with his campaign climate pledges.

Alberta Premier Jason Kenney called the move a “gut punch” and an “insult” and has threatened legal action to recoup Alberta’s $1.5 billion investment in the project.

Prime Minister Justin Trudeau issued a statement that expressed disappointment, but struck a far more conciliatory tone. He signalled a desire to work with the Biden administration and implicitly conceded that the pipeline won’t be resurrected again.

While the reaction from Alberta implies Biden’s move came as a shock, the truth is that cancelling Keystone XL was a key part of Biden’s election platform and was telegraphed clearly throughout the campaign.

Obama’s rejection

It’s worth remembering that Keystone XL was rejected previously by Barack Obama’s administration in 2015, after several years of controversy, and that the environmental concerns used to justify that decision have not gone away. This decision should have been expected and planned for.

But it would seem that both Alberta and TC Energy (formerly TransCanada) felt that there was a good chance the project would proceed despite Biden’s election win. Early in January 2021, TC Energy opened bidding on existing pipeline space expected to be freed up by the construction of the new line.

The Keystone XL cancellation will significantly impact Canada and Alberta. TC Energy has estimated that Canada would have added 2,800 jobs directly associated with this project, mostly in Alberta, and contends the United States would have seen 10,400 new positions.

The Biden administration’s cancellation of the Keystone XL pipeline was largely expected on both sides of the border, especially given former President Barack Obama previously rejected the project in 2015. Photo: Government of Alberta / Flickr

Let’s put that in perspective: in 2020, it was estimated that total oil and gas employment in Alberta was 128,180, and thus the number of lost jobs represents 2.2 per cent of the total sector employment in the province — a very significant proportion for a single project.

The loss of Keystone XL also will impact future projects in the province’s oilsands. We know that one of the reasons that companies are reducing investments in the oilsands is that there is a transport bottleneck that affects the ability to get new product to market.

Keystone XL would have been able to move 830,000 barrels per day. Total Canadian oilsands production is only 2.9 million barrels per day, so adding Keystone XL may have attracted new investment to the oilsands to take advantage of this transportation capacity, which in turn would have meant billions in royalties to the province. GDP growth resulting from this investment would have benefited all of Canada.

Read more: Trans Mountain, Coastal GasLink, Keystone XL: where things stand with Canada’s pipeline projects

The cancellation of Keystone XL could leave Alberta out-of-pocket for the $1.5 billion invested by the government earlier this year. This investment — almost $400 for each individual in the province — may be recouped through legal means or reinvested by the company, or simply written off.

The province also made $6 billion in loan guarantees that may be recovered. Overall, however, the province will likely lose money on this deal — and the voters ultimately will decide the price.

Energy East born again?

So what’s next?

There have been reports that some of the pipe and materials may be sold for scrap if Keystone XL can’t move forward. In reality, the majority of the actual pipe has not yet been laid, meaning pipes could easily be repurposed for other projects. So some investment may be recovered over an extended time.

Indeed, TC Energy may look to the past when figuring out its next move.

One option that might be explored is revisiting Energy East, a pipeline that would have seen 1.1 million barrels per day of Alberta oil travel over 3,000 kilometres to reach tidewater at Saint John, N.B.

Read more: Total’s Alberta oilsands writeoff is a wake-up call — not a cheap shot

Energy East was arguably the most complicated infrastructure project ever imagined in Canada, involving the federal government, six provincial legislatures, hundreds of municipalities and 180 traditional Indigenous territories. The project would have crossed thousands of waterways ranging from streams to major waterways including the South Saskatchewan, Red, Ottawa, and St. Lawrence rivers.

The project was hugely controversial, and was cancelled in 2017 — partly because former president Donald Trump had re-approved Keystone XL earlier that year.

Rethinking pipelines

But before backing yet another pipeline project, Alberta and all of Canada ultimately need to decide if more pipeline capacity is really needed.

Keystone XL struggled to find investors prior to Alberta’s decision to provide funds. The frequently cited “Canadian discount” in oil prices, which entails Canadian oil being sold at lower prices than the West Texas Intermediate (WTI) index, has in recent months been reduced as oil prices have begun to recover.

In Ottawa and in Washington, policies to address the climate emergency have taken precedence over new investment in conventional, fossil fuel-based industries.

The Keystone XL project was already struggling before the Biden administration’s cancellation. Now, Alberta and the federal government will need to think carefully on whether Canada really needs more pipeline capacity. Photo Amber Bracken / The Narwhal

The future of Canada’s oil sector may not be in volume, but in value.

Consider that four to five per cent of the volume of oil becomes high-value products like plastics, rubber and chemicals; these products can account for 40 per cent or more of the value derived from a barrel of oil.

New refineries are being designed that focus on these value-added products and minimize bulk fuel products; these new facilities may be smaller and require far less in terms of input, reducing the need for new pipelines.

The death of Keystone XL is a wake-up call for the oil sector. The old way of doing business is fading away, and it must innovate to survive.

Warren Mabee, Director, Queen’s Institute for Energy and Environmental Policy, Queen’s University, Ontario

This article is republished from The Conversation under a Creative Commons license. Read the original article.

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Even as calls abound for a green economic recovery from the COVID-19 pandemic, construction is underway on major new pipelines in B.C. and Alberta to carry diluted bitumen and natural gas to international markets. 

For experts who say the world is already moving too slowly to avoid catastrophic climate change the decision to build new pipelines is a pressing concern. But for Alberta’s oil industry, which has felt the pinch from a lack of pipeline capacity for years, new construction offers hope for better prices down the road.

The federal government, meanwhile, continues to insist that Canada can have both a strong oil and gas industry and meet its climate targets.

In comments to The Globe and Mail in July 2020, Canada’s Natural Resources Minister Seamus O’Regan said, “I am very serious about combatting climate change and I’m very serious about net zero, and that means we need to make sure we have a prosperous, innovative, healthy oil and gas industry.”

Despite ongoing uncertainty about major pipelines south of the border and opposition to projects such as the Trans Mountain pipeline in Canada, O’Regan said the federal government is pushing for both Keystone XL and Enbridge’s Line 3 replacement to move forward.

On Trans Mountain, he told The Globe: “It’s getting built.”

However, the prospect of new oil and gas infrastructure could pose a major challenge for reducing greenhouse gas emissions, as major investments in pipeline projects signal a commitment to oilsands production for years to come.

“I’m very worried,” said Juan Moreno-Cruz, a Canada Research Chair in energy transitions based at the University of Waterloo, who pointed to a 2019 analysis in the journal Nature that found existing fossil fuel energy infrastructure has already put the world’s ability to limit warming to 1.5 C at risk.

“Every time you do something new, something as monumental as these pipelines, you are delaying that and increasing the chances that we’re just not going to be able to achieve the climate goals we need to,” Moreno-Cruz said.

In its World Energy Outlook 2020, the International Energy Agency projects demand for oil will recover from its “historic drop in 2020” by 2023, but expects demand will plateau after 2030 based on policies currently in place and an assumption that the pandemic is under control next year. 

In a scenario where countries are pursuing net-zero emissions by 2050, the International Energy Agency projects demand for oil will fall over the next decade as demand for renewable energy increases. 

Richard Masson, an executive fellow at the University of Calgary and chair of the World Petroleum Council, said he believes the oilsands will play a part in providing fuels for transportation and feedstock for petrochemicals for decades to come. 

“There are really very limited choices for transportation fuel. Electricity doesn’t work for jets and trains and planes. And even for cars, electric vehicles are a tiny share of the market and it’s going to be a long time before they take a meaningful share of the market,” he said.

New pipelines will help ensure Alberta producers aren’t forced to sell their product at a discount, Masson added.

Several factors have contributed to the lower prices for Alberta crude, according to Masson. Looking back to 2018, there wasn’t enough pipeline capacity to carry all the oil that was being produced in Alberta to refineries, causing a glut in the province. In addition, a number of the U.S. midwest refineries that usually take in Alberta oil were undergoing repairs, so there was less demand for the raw product (leaving producers to send their oil to refineries that were less efficient at processing heavy oil).

“That just resulted in this huge blowout in prices,” said Masson.

In response, the Alberta government brought in curtailment, restricting the amount of oil produced in the province, he explained. 

This year, as demand dropped due to COVID-19, producers voluntarily cut production, but Masson said, it won’t be long before demand climbs back up and pipeline capacity becomes an issue once again. 

Beyond the risks of ongoing reliance on fossil fuels affecting climate change, there are significant concerns about the local environmental threat posed by some of the major pipeline projects currently under construction.

The devastating consequences of a diluted bitumen spill in the Salish Sea, for instance, is a major concern for some coastal First Nations who oppose the Trans Mountain pipeline expansion.

Cynthia Callison, a founding partner of the Vancouver law firm Callison & Hanna and a member of the Tahltan Nation in northwest B.C., said those underlying reasons — the risk of irreparable harm to traditional territories — are critical for understanding why many Indigenous people haven’t consented to the project.

“For Indigenous people, they believe that the risks are too high, that they’re too great, that there is no way to mitigate any leak especially around important waterways,” Callison said.

She pointed to the potentially devastating impacts of an oil spill in the Fraser River, a major salmon-bearing river many First Nations rely on for both food and the survival of their cultural practices.

Despite the risks, construction is underway on major pipelines in Canada. Here’s the status of four key projects.

Trans Mountain pipeline

The Trans Mountain expansion would lead to a major spike in tanker traffic in the Burrard Inlet. Photo: Edna Winti / Flickr

Construction of the controversial 1,150-kilometre Trans Mountain pipeline, which will increase pipeline capacity from 300,000 to 890,000 barrels per day and result in a sevenfold increase in tanker traffic to the Westridge Marine Terminal in Burnaby, B.C., is underway in both B.C. and Alberta.

Trans Mountain Corporation said in early September that construction in the Edmonton area is nearly done. Construction of the pipeline and pump stations was ongoing in the Yellowhead region of Alberta as of late August.

In B.C., meanwhile, Trans Mountain contractor Surerus Murphy Joint Venture laid the first section of pipe in Kamloops in late September and Trans Mountain said pipeline construction is expected to begin along the Lower Mainland route in the coming months. The route between Surrey and Burnaby has already been approved by the Canada Energy Regulator, but just 3.5 per cent of the route through the Fraser Valley has been approved so far.

Construction is ongoing at the Westridge Marine Terminal in the Lower Mainland, where 60 of 162 piles have been installed so far, according to a September update. Two of the three new births are expected to be open by December 2022.

The cost of the pipeline expansion, which alongside the existing pipeline is now owned by a federal Crown corporation, has ballooned from an estimated $7.4 billion to $12.6 billion.

The project continues to face opposition in B.C. from some First Nations and environmental groups deeply concerned about the threat it poses to lands and waters. 

In an Oct. 19 open letter to the CEOs of finance and insurance companies, a group of Indigenous women and organizations called on the institutions to stop financing, investing and insuring projects related to the oilsands.

“The tar sands sector poses grave threats to Indigenous rights, cultural survival, local waterways and environments, the global climate, and public health,” the letter says.

Earlier in October, five people, including a Secwepemc Nation Hereditary Chief and his daughter, were arrested while protesting Trans Mountain near a worksite in Kamloops.

The route of the Trans Mountain pipeline. Graphic: Carol Linnitt / The Narwhal

Opponents of the project were dealt a loss this summer when the Supreme Court of Canada refused to hear an appeal of a lower court decision denying an application for judicial review of the Trans Mountain expansion approval from three affected First Nations. But legal experts say there may be other avenues First Nations opposed to the project can pursue. 

Callison said First Nations could still make an international complaint through the United Nations that Canada has failed to respect Indigenous rights.

Such a complaint could have a powerful effect, she said. Canada doesn’t “want to lose face, they don’t want to be seen as not respecting the legal rights of Indigenous people,” Callison said.

“So when there is a human rights body that condemns Canada for failing to protect those rights, they do take action, or they have in the past.”

The economic case for the project has also been questioned, most recently by earth scientist David Hughes in an October report for the Canadian Centre for Policy Alternatives.

According to the federal government, it’s estimated that the Trans Mountain expansion will increase revenues for producers by $73 billion over 20 years and increase government revenues by $46 billion through the construction and first two decades of operation.

“TMX will also help strengthen Canada’s advantage as a secure and stable global supplier of oil — now and in the future — while generating the revenues to fund its transition to a low-carbon future,” the federal government says on a website detailing the project’s economic benefits.

Hughes writes that between revised production forecasts, announced expansions and optimizations of other existing pipelines, including Enbridge’s Line 3, and the decline in oil demand driven by COVID-19, there’s no need for additional pipeline capacity from the Trans Mountain expansion.

He also questions the potential for exports to Asia to improve prices for Canadian oil producers, given current prices and higher transport costs.

“The $12.6 billion the government plans to spend on the construction of TMX is counterproductive, as it is unlikely to increase the profits of Canadian producers or result in a revenue stream that will both cover the construction costs and provide additional funds to reduce emissions in a meaningful timeframe,” he writes.

“If anything, TMX will exacerbate the emissions problem by incentivizing additional production growth while diverting funds that could otherwise be spent on actual emissions reduction.”

TC Energy’s Coastal GasLink pipeline

Unist’ot’en spokesperson and camp founder Freda Huson in the foreground as the RCMP enforce a Coastal GasLink injunction in February 2020. Photo: Amber Bracken / The Narwhal

A linchpin of B.C.’s burgeoning liquefied natural gas industry, the roughly 670-kilometre Coastal GasLink pipeline will carry natural gas from northeast B.C. to Kitimat, where it will be liquefied for transport overseas. The pipeline is expected to begin operating in 2023.

The $6.6 billion pipeline, owned by TC Energy, is strongly opposed by the Wet’suwet’en Hereditary Chiefs and their supporters. There are significant concerns that pipeline construction could harm protected wetlands, erase cultural history and pose a safety threat to Indigenous women as a result of worker camps. 

Despite these concerns, construction has moved forward and almost 3,500 people were working along the pipeline right-of-way in October, the company said in a construction update. Grading is underway in four of the eight pipeline segments to prepare the land for pipe installation.

Twenty-one per cent of the pipeline is already installed in northeast B.C. along the first route segment, which runs from west of Dawson Creek to south of Chetwynd. Pipe is also being installed at the LNG Canada connector site near Kitimat.

Map of the Coastal GasLink pipeline. Map: Carol Linnitt / The Narwhal

The Coastal GasLink project has faced considerable opposition from Wet’suwet’en Hereditary Chiefs and their supporters. In February, RCMP arrested more than two dozen people, including Unist’ot’en matriarchs at the Unist’ot’en Healing Centre, as they moved to enforce a court injunction aimed at preventing land defenders from blocking Coastal GasLink’s access to worksites. Protests, including rail blockades, sprung up across the country in support of the Wet’suwet’en.

Lawyers for the Office of the Wet’suwet’en appeared in court in October, asking the B.C. Supreme Court to quash the recent extension of Coastal GasLink’s environmental assessment certificate by the Environmental Assessment Office, the Canadian Press reported.

While the province argued the judicial review is unwarranted, lawyers for the Office of the Wet’suwet’en argued further consideration is needed to determine the project’s potential risks to Indigenous women and girls. The lawyers also raised concerns about TC Energy’s track record of non-compliance with existing environmental conditions, according to the Canadian Press.

Read more: How the Wet’suwet’en crisis could have played out differently

TC Energy’s Keystone XL pipeline

Construction of the Canadian portion of the Keystone XL pipeline has been halted after U.S. President Joe Biden used his first day in office to sign an executive order cancelling a permit for the project.

The move dealt a blow to the planned 1,947-kilometre pipeline, which would ship 830,000 barrels a day of crude oil from Hardisty, Alta., to Steele City, Nebraska, where the crude would enter existing pipes en route to refineries on the Gulf Coast. The pipeline was expected to be in service by 2023.

Natural Resources Minister O’Regan has said the federal government is “intent on getting it done” and Prime Minister Justin Trudeau responded to the Biden permit cancellation by vowing to fight to save the project.

Alberta, meanwhile, bet $1.5 billion dollars on the project moving forward. Premier Jason Kenney’s United Conservative Party government announced a $1.5 billion investment in TC Energy through stocks, as well as a $6 billion loan guarantee in 2021 to help complete the pipeline.

Kenney said should the project get cancelled, his province would pursue legal avenues for compensation. Kenney also called on Trudeau to pressure the Biden administration to reconsider its decision by raising the prospect of trade sanctions.

Construction on the 269-kilometre Canadian portion of the pipeline began last summer. According to a fall update, construction was underway at the five pump stations in Alberta and along the pipeline right-of-way.

Alberta Premier Jason Kenney greets workers in Oyen, Alta, on July 3, after announcing the provincial government’s financial support of Keystone XL. Photo: Chris Schwarz / Government of Alberta / Flickr

Enbridge’s Line 3 pipeline

Enbridge’s Line 3 pipeline aims to replace the existing 34-inch diameter pipe running from outside of  Edmonton to Superior, Wisconsin, with a 36-inch pipe along most of the route to nearly double its capacity to 760,000 barrels per day, according to the U.S. project page.

Construction of the $5.3 billion Canadian portion of the Line 3 replacement is complete and began operating at the end of last year, but there are fresh delays on construction south of the border.

Significant construction work was put off until 2021 when a Minnesota pollution regulator said in June it would hold public hearings on key water permits for the Enbridge project. The contested case hearing was requested by environmental groups and two Indigenous Nations. 

In an opinion released in October, the judge who presided over the hearing said the groups challenging the permits had not proven the project would cause permanent harm to water quality and wetlands, the Star Tribune reported.

The Minnesota pollution regulator must decide in November whether to approve the water permits.

On energy transitions, ‘the sooner we start, the better’

Overhauling the energy system — shifting from a reliance on fossil fuels to clean energy — is no easy task. 

“The only thing we know is that the sooner we start, the better,” said Moreno-Cruz of the University of Waterloo. “We should have started a long time ago.”

Even as governments and industry continue to invest in fossil fuel infrastructure in Canada and around the world, Sarah Petrevan, policy director at Clean Energy Canada, said there are signs the clean energy transition is taking off.

Globally, “publicly traded renewable power portfolios have posted significantly higher returns for investors and lower volatility than fossil fuels during the past 10 years,” she said, referencing research from the International Energy Agency and the Imperial College of London.

At the same time, Clean Energy Canada’s own research shows that while 50,000 jobs could be lost in fossil fuels over the next decade, there could be more than 160,000 created in clean energy, she said.

“Based on some of the stats and the trends that we’re looking at, there is more bang for your buck for governments to invest in a clean energy future,” she said.

Update Jan. 21, 2021 10:37 a.m. PST: This article has been updated to reflect reaction to the Biden administration’s cancellation of a permit for the Keystone XL pipeline.

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TransCanada’s Energy East pipeline is officially dead.

Announced via press release on Thursday, the news confirmed long-held suspicions that the $15.7 billion, 4,500 km oilsands pipeline simply wouldn’t cut it in today’s economic context.

But that hasn’t stopped commentators on all sides from pouncing on the cancellation as proof of their political project. Conservative politicians have lambasted the federal Liberals for introducing carbon pricing and new rules on pipeline applications, while environmentalists have claimed the company’s decision was a direct result of their organizing.

DeSmog Canada is here to help wade through the mess. Here are five things you should know about the cancelled Alberta-to-New Brunswick pipeline.

1. Energy East was primarily for export

Perhaps the most lingering myth about Energy East was that it would be built to displace foreign oil imports in Eastern Canada.

In fact, that very notion was repeated by Alberta Premier Rachel Notley in her Facebook post about the cancellation: “We believe this nation-building project would have benefited all of Canada through new jobs, investment, energy security and the ability to displace oil being imported into Canada from overseas and the United States,” she wrote.

Except it’s never been true.

An application by TransCanada to the National Energy Board back in May 2016 indicated that it would ship an estimated 281 tankers per year of oil, equivalent to about 900,000 barrels per day. That’s more than 80 per cent of the pipeline’s planned 1.1 million barrel per day capacity, leaving around 200,000 barrels per day to be refined at New Brunswick’s Irving Oil refineries.

That’s far below the 736,000 barrels per day that TransCanada suggested is being imported from foreign countries due to a lack of a west-to-east pipeline. In addition, Irving Oil’s president suggested in 2016 that his company wouldn’t necessarily displace its use of cheaper barrels from Saudi Arabia with product from Alberta.

Energy East was never about energy independence. The whole point was to ship oil by tanker to the U.S. Gulf Coast for refining.

2. Canada’s regulatory process is catching up with reality

Back in early September, TransCanada requested that the National Energy Board suspend its review of the Energy East project for 30 days.

That followed news that the review panel for the pipeline would be evaluating the climate impacts of upstream and downstream emissions associated with the project: a first for any major Canadian pipeline. (The Keystone XL pipeline in the U.S. was also subject to a climate test.)

It’s something that many industry boosters have now locked on to as the pipeline’s deathblow.

What’s often left unacknowledged is that Canada has committed to international climate change goals under the 2015 Paris Agreement, requiring the country to slash 230 megatonnes in annual greenhouse gas emissions by 2030. That’s where policies like the federal carbon pricing mandate and the overhaul of the National Energy Board and Canadian Environmental Assessment Agency can come into play, integrating climate tests into the very fabric of reviews.

In addition, many critics conveniently fail to mention that the entire National Energy Board review process for Energy East was suspended with all decisions thrown out because the National Energy Board privately met with TransCanada consultant and former Quebec premier Jean Charest.

The complete restarting of the process and inclusion of a climate test was the price of doing business in a country ostensibly committed to reducing greenhouse gas emissions and introducing transparent environmental reviews.

3. Canada doesn’t necessarily need more pipelines

Energy East was the last of the big four Canadian pipelines to get underway.

Kinder Morgan’s Trans Mountain and Enbridge’s Line 3 pipelines were both approved by the current Liberal government, while TransCanada’s Keystone XL was resuscitated with the election of U.S. President Donald Trump.

All offer better prices for exporters. As noted by University of Alberta professor Andrew Leach, shipping crude to New Brunswick via Energy East would cost $10/barrel, far higher than other networks.

That matters a lot given heavily reduced forecasts for oilsands production in coming decades. The Canadian Association of Petroleum Producers now estimates that oilsands production is expected to hit 3.7 million barrels per day by 2030. That’s down from their 2013 forecast of 5.2 million barrels, when Energy East was first announced.

In other words, Alberta at most  needs an additional 1.3 million barrels of pipeline capacity by 2030. Just two of the three aforementioned pipelines would easily allow for that.

And that’s to say nothing of Alberta’s cap on oilsands emissions of 100 megatonnes per year (for comparison purposes, Ontario plans to reduce all of its emissions to 115 megatonnes by 2030).

Unless there are substantial technological innovations that cut per-barrel emissions, it’s expected that the province will hit its emissions cap by 2030. That calls into question the need for several of the pipelines that are further along in the process, let alone Energy East.

5 Things You Need to Know About the Cancellation of #EnergyEast https://t.co/yUPyOUruzy #oilsands #climate #cdnpoli #keystonexl pic.twitter.com/6jJV9KqGLd

— DeSmog Canada (@DeSmogCanada) October 6, 2017

4. The majority of Canadians want to decrease oil demand

Spend too much time in the “Canadian politics” corner of Twitter and you might be inclined to believe that the average Canadian overwhelmingly favours increased oil and gas development.

But that’s not at all the case, based on recent polling numbers by Abacus data.

A poll published in September noted that 55 per cent of people would prefer to see demand for oil drop in the coming decade, with 65 per cent wanting to see a decline in the next 30 years. Even in Alberta, there are more people who wish to see oil demand decline in 10 years (38 per cent) compared to people who want to see oil demand increase (28 per cent).

There’s also been a marked drop in support for pipelines. In 2014, 58 per cent of Canadians supported building more pipeline capacity. Now, that number has dropped to 44 per cent.

In addition, when asked “recently, I’ve grown more worried about climate change and it is changing my view of how long we should use oil,” 22 per cent of people said “strongly agree” while another 37 per cent said “agree.”

This clear shift in public opinion is in line with the global consensus that the world needs to rapidly reduce emissions to avoid the worst of climate change.

5. This was about harsh economics

Environmental organizations across the country loudly celebrated in the wake of the cancellation. To be sure, Indigenous and environmental organizing has greatly raised the public profile of major pipeline projects like Energy East and arguably contributed to delaying the process while market conditions changed. But it’s seriously doubtful that the project would have been cancelled if oil prices were hovering in the $70-plus/barrel range and the company’s Keystone XL project was still blocked by the U.S.

TransCanada couldn’t make the numbers work. There was enormous unused capacity risk at play. To proceed with a multi-decade project in an era of sustained low oil prices and depressed production forecasts would have been a baffling decision.

Now, the company only faces a $1 billion charge to write down the project instead of $16 billion in capital expenses that might not ever be recovered. This move also allows them to focus more on making Keystone XL happen, and investing in markets with less immediate competition.

It doesn’t have quite the same inspirational tone to it. But hey, that’s capitalism for you.

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Canadian pipeline company TransCanada announced today it will no longer be proceeding with its proposed Energy East Pipeline and Eastern Mainline projects.

“After careful review of changed circumstances, we will be informing the National Energy Board that we will no longer be proceeding with our Energy East and Eastern Mainline applications,” said president and CEO Russ Girling in a statement released Thursday morning.

The $15.7 billion Energy East pipeline planned to transport 1.1 million barrels of oil per day from western Canada’s oilsands to refineries in Quebec and Saint John, New Brunswick, as well as an export terminal in New Brunswick.

In late August, the National Energy Board — an independent regulatory agency that oversees international and inter-provincial oil and gas pipelines —  announced it would consider upstream and downstream greenhouse gas emissions in determining whether the Energy East pipeline was in the national interest. This marked a first for the board, which had come under fire for not considering climate impacts in other pipeline hearings.

Both Enbridge’s Northern Gateway pipeline and Kinder Morgan’s Trans Mountain pipeline received regulatory approval with no consideration of their impacts on greenhouse gas emissions.

TransCanada asked the National Energy Board to put its regulatory review hearings on hold while it reviewed the decision to include an assessment of the pipeline’s impact on greenhouse gas emissions.

The decision to abandon the project comes amid low oil prices and an expected slow-down in oilsands production. Several international companies have sold off oilsands projects in the past year.

“The reason that Shell, Total and Statoil are pulling out, and the reason that Exxon has had to write down much of its Kearl Lake reserves, isn’t because of the emissions profile of the oilsands bitumen,” Jeff Rubin, senior fellow of Centre for International Governance Innovation, told DeSmog Canada in March. “It’s rather because it doesn’t make any economic sense, before we even look at emissions pricing.”

TransCanada Cancels Energy East Oilsands Pipeline. What now? https://t.co/eiNT24HaC9 #EnergyEast #cdnpoli #oilsands #climate pic.twitter.com/alGcqImBXb

— DeSmog Canada (@DeSmogCanada) October 5, 2017

In November 2015, the Alberta government announced its climate plan, which gained support from a wide range of environmentalists and the CEOs of Suncor, Canadian Natural Resource Ltd. (CNRL), Shell and Cenovus.

The plan caps oilsands emissions at 100 megatonnes per year. Environment Canada figures predicted a 2020 output of 103 megatonnes from the sector, so for production to expand beyond current projects, per barrel emissions will need to be reduced.

Pipelines have become a symbol of the larger debate about climate change, with new pipeline proposals threatening to enable increased oil production at a time when scientists and world leaders agree rapid de-carbonization is needed.

New polling released by Abacus Data in September indicates a majority of Canadians (59 per cent) are growing “more worried about climate change and it is changing my view of how long we should use oil.” That includes 48 per cent of Albertans and 35 per cent of Conservative voters.

“Energy, pipeline and climate issues have been among the most highly charged political debates in Canada for several years,” said Abacus chairman Bruce Anderson.

“What we are seeing in our numbers now is an evolution of opinion: concerns about climate change have deepened, and belief that the world is going to transition away from oil has grown.”

Three pipelines are still in the running: the Trans Mountain pipeline to the B.C. coast, the Keystone XL pipeline to the Gulf coast and Enbridge’s Line 3 export line to the U.S. All of these pipelines have received regulatory approval in Canada — but hurdles still remain.

Alberta Premier Rachel Notley said Thursday that now  Energy East is dead, there is an even greater urgency in completing the Trans Mountain project to B.C. to diversify the industry's export markets beyond the United States.

The B.C. government doesn’t share her view, however, and is currently part of a court challenge against Trans Mountain being heard this week.

The Canadian Energy Pipeline Association and others blamed TransCanada’s decision on Ottawa’s “unclear decision-making process.”

However, New Brunswick Premier Brian Gallant told the Globe and Mail he received assurances from Ottawa that the greenhouse gas assessment didn’t represent an insurmountable hurdle for TransCanada.

"Given the positive signals the federal government has sent to TransCanada over the last weeks . . . we believe it is clear that TransCanada is not proceeding with its application for the Energy East pipeline because recent changes to world market conditions and the price of oil have negatively impacted the viability of the project," Gallant said.

TransCanada had hit regulatory hurdles even before the greenhouse gas assessment was announced. In the summer of 2016, the National Energy Board’s review of Energy East was compromised after it was revealed by the National Observer that former Quebec Premier Jean Charest met the chairman and two commissioners on the National Energy Board while working for TransCanada.

The National Energy Board ended up suspending the hearings into the proposed 4,500-kilometre pipeline and selecting a new panel.

TransCanada is expected to take an estimated $1-billion charge on its pre-tax fourth-quarter earnings due to Thursday’s announcement.

Photo: shannonpatrick17 via Flickr

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The Alberta Energy Regulator — responsible for regulating more than 430,000 kilometres of pipelines in the province — has finally started to try to clean up its image.

In the last two weeks of February, the agency launched a “pipeline performance report” that graphs recent pipeline incidents, it levelled a $172,500 fine against Murphy Oil for a 2015 spill that went undetected for 45 days and it shut down all operations by the notoriously uncooperative Lexin Resources, including 201 pipelines.*

But critics suggest there are major systemic flaws in the Alberta Energy Regulator (AER) that still need to be addressed if pipeline safety is to be taken seriously.

“It’s absolutely ridiculous,” says Mike Hudema, climate and energy campaigner for Greenpeace Canada. “You’re talking about a spill that went undetected for 45 days. And the company was fined an amount that they could likely make in less than an hour. That doesn’t send any message to the company. It definitely doesn’t send any message to the industry. And it doesn’t reform company behaviour.”

Ecojustice lawyer Fraser Thomson agrees there are major gaps in oversight.

“There are still significant, significant issues with transparency and accountability on what the AER calls ‘incidents’ within the oil and gas sector,” Thomson said.

AER Accused of Mixed Mandate, Industry-Friendly Structure

The AER was formed in late 2012 with the merging of the Energy Resources Conservation Board and some duties of the ministry of environment and sustainable development.

It’s been under fire from critics ever since.

For one, it’s often accused of having a mixed mandate. Only a month-and-a-half after forming government in 2015, Alberta Premier Rachel Notley suggested the AER can’t do the job of environmental protection and monitoring when its “overarching mandate is to promote energy development.”

Notley reported the government would review the AER’s mandate and potentially split it into two agencies: one for monitoring, another for approvals. But only six months later, the AER received a letter confirming the current organizational structure would be maintained.

“We haven’t really seen much sea change,” Hudema said. “Until that happens, unfortunately Alberta will be plagued with the pipeline problems that has plagued it for decades.”

It hasn’t helped matters that the AER’s chair Gerry Protti was a former Encana executive and founding member of the Canadian Association of Petroleum Producers, or that the AER is entirely funded by industry.

In 2013, Notley — then serving as the NDP’s environment critic — called on AER CEO Jim Ellis to resign due to his involvement in a scandal about the suppression of anti-oilsands dissent by government, describing the situation as “banana republic stuff.”

It’s a sentiment reflected by renowned ecologist Kevin Timoney, who recently reported that the AER has vastly underestimated spill volumes and recovery efforts between 1975 and 2013.

“There was some movement towards improving monitoring [in recent years] but those efforts have been undermined by senior management,” he writes in an e-mail. “Enforcement is still little more than a facade.”

Online Database An Improvement, But "Pretty Frail"

Duncan Kenyon, director of the Pembina Institute's responsible fossil fuels program, says the AER first made it a serious priority to deal with pipeline spills following the 2012 release of 461,000 litres of sour crude oil into the Red Deer River by Plains Midstream.

That same year, the provincial government ordered a pipeline safety review, which ended up being itself criticized by Notley and others for failure to consult or actually consider incidents (instead opting to simply compare regulations to other jurisdictions).

Recent spills haven’t exactly bolstered the regulator’s reputation.

The aforementioned Murphy Oil spill in 2015 resulted in 9,000 barrels of condensate spilling onto public land near Peace River. A spill at Nexen Energy’s Long Lake facility that same year released 31,000 barrels of emulsion between June 11 and July 15, despite being a brand new pipeline.

Around 1,500 barrels of oil emulsion was also spilled by Trilogy Energy near Fox Creek in October 2016.

Thomson notes that an incident first reported in 2013 involves a Canadian Natural Resources Limited in-situ project near Cold Lake in which bitumen started bubbling to the top over the period of months and years. The AER’s compliance dashboard lists the incident as “ongoing” with the “emergency phase over July 17, 2013.”

He says that he still can’t get an answer to whether the spill is happening or not.

“When it comes to the information that people want to know — what’s the risk here, is it safe, is there a safety risk to humans, wildlife environment and treaty rights — the compliance dashboard is a pretty frail tool to access it,” Thomson said.

In addition, he notes that language used by the AER often confuses things for the public: for instance, the regulator will use “produced water” in reference to “toxic water” with a high concentration of salts that are dangerous to local environments and often have oil residue in them.

Similarly, he says the AER will report “no recorded impacts” as opposed to “impacts unknown.”

“I think it would be reasonable for the public to read that and assume there weren’t impacts, when it’s really a turn of phrase,” Thomson says.

#Alberta’s Pipeline Oversight a ‘Facade’: Experts https://t.co/4942NmkdkM @james_m_wilt @HuffPostAlberta @ProgressAlberta #ableg #cdnpoli pic.twitter.com/nq8N7xd0CJ

— DeSmog Canada (@DeSmogCanada) March 23, 2017

Self-Reporting Only Works If Regulator Ensures Compliance

The AER claims that the length of pipelines in Alberta has grown by 11 per cent over the last decade, with “incidents” dropping by 44 per cent.

But Timoney’s recent report complicates the matter even further, suggesting that many spills weren’t recorded, and that many former oil spill sites that have reportedly been reclaimed are still contaminated from pipeline leaks.

“According to the data that I have received from the regulator, the number of spills has declined in recent years,” he explains in an e-mail. “However, it is important to remember that those data are based on industry self-reporting; they are not independently verified. Incidents occur that are not reported, but the frequency of unreported incidents is not known.”

Kenyon agrees: “If you don’t have a regulator who’s going out and actually seeing if people are complying — going out there and doing audits and seeing if what they said in their self-report is accurate — then none of that data is worth anything.”

Alberta’s Fines Well Below National Average

That’s why many point to the lack of enforcement as a key problem.

That starts with fine limits, which is established by the province. Alberta has fairly low caps on penalties compared to other provinces, Thomson says.

Data compiled by Ecojustice and shared with DeSmog Canada indicates a clear trend: the provisions that are most often used — Section 108(2) and 109(2) of the Environmental Protection and Enhancement Act, concerning the “release of substance causing adverse effect to environment” — has a cap of $500,000 in Alberta, compared to a cap of $1 million in B.C., Saskatchewan, New Brunswick, Nova Scotia and Newfoundland.

In Ontario and Quebec, the maximum limit for first conviction is $6 million. The only provinces that have an equal or lower cap are Manitoba ($500,000) and Prince Edward Island ($50,000).

Cheaper to Pay Fines Than Maintain Pipelines

But the “administrative penalties” issued by the AER often fall well below that $500,000 mark.

The largest fine issued yet by the regulator was $250,000 against Pengrowth Energy for the 48-day spill of 537,000 litres of oil emulsion in late 2013. The recent fine against Murphy Oil was also one of the highest penalties in the AER’s history; Thomson says it was calculated based on every day the company failed to report it, which is a “positive development.”

The strange reality is that many pipeline companies do have leak detection systems in place. It’s just that companies often don’t direct resources into maintaining them, following what Kenyon calls a standard compliance versus non-compliance cost comparison model; in other words, it’s cheaper to ignore and risk the fine than pay for annual maintenance.

In the case of the Murphy Oil spill, the company failed to check for internal corrosion and perform maintenance on the leak detection system for three straight years even though it was required to check annually.

“You can put a management system in and then have it down in paper, but not everything is operating the way it’s supposed to,” he says. “And then you can claim when there’s a foul up that it just wasn’t operating as it was supposed to. But you never turned it on the way it was supposed to.”

More Boots on the Ground Needed

An AER spokesperson emphasized in an e-mail that the agency is working on addressing data collection issues and improving reporting spill clean-up.

In addition, the spokesperson said the regulator requires operators to implement “comprehensive integrity management programs and safety and loss management systems,” conducts “pipeline inspections on a regular basis” and provides “education on pipeline integrity.”

However, changing the trajectory of the AER ultimately requires new “marching orders” from the provincial government via an expansion of mandate, pressures to prioritize compliance and an increased limit on fines. It’s something the NDP has appeared reluctant to do; Kenyon says there “might have been more pressure coming on pipelines under the previous government.”

The press secretary for energy minister Margaret McCuaig-Boyd says via e-mail there are no plans to revisit the government’s decision to keep the AER as is.

Thomson says he’s not convinced that splitting up the regulator would address some of the systemic problems, which ultimately require more boots on the ground: “Industry needs to know that if they submit data and monitoring to the AER, that there’s a good chance it will be checked.”

Meantime, the Alberta government continues to push for any and all new pipelines, from Kinder Morgan Trans Mountain to Trans Canada’s Keystone XL and Energy East.

“I really feel like the government should get its own pipeline problems in order before it’s pushing for new pipelines to new jurisdictions,” Hudema concludes.

“When you’re averaging over one spill a day, it’s not something that you should be bragging about or pushing into new communities.”

*Correction: The article originally stated that the AER had recently launched its compliance dashboard. The dashboard has in fact been available for a few years. The regulator recently launched a “pipeline performance report” that graphs recent pipeline incidents

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Access to world markets for Canadian oil has been available since 1956 when the Westridge dock was constructed in Burnaby, B.C., and linked to the Trans Mountain pipeline.

The dock’s export capacity has rarely been used to its full potential in more than 60 years — yet the oil industry and politicians continue to make the argument that Canada needs new pipelines to get oil to world markets.

Here are four reasons that argument doesn’t fly.

1) Existing Export Capacity Isn’t Being Used

In 2011, the National Energy Board (NEB) provided Kinder Morgan with a favourable and unprecedented ruling when it allocated guaranteed access to the dock under 10-year take-or-pay contracts with five crude oil shippers.

Kinder Morgan promised that 79,000 barrels a day of tidewater access would lead to the development of international markets for Alberta’s crude.

It didn’t.

Guaranteed access means the dock can service 60 crude oil tankers a year. But according to statistics compiled by Port Metro Vancouver, not even a third of that number were loaded during 2016 — and most of those tankers went to U.S. ports. The equivalent of one tanker was loaded with Alberta’s heavy oil and destined for a non-U.S. port during the entire year. Seventeen went to U.S. destinations.

If Canadian oil needs to get to world markets as desperately as some claim, why isn’t existing access being used? It’s because there is no demand for it.

2) Energy East Won’t Reduce Reliance on Foreign Oil

“The lamentable state of crude oil pipeline infrastructure makes parts of this country reliant on foreign oil and our petroleum exporters dependent on the United States, which buys Canadian product at a deep discount,” wrote Conservative Senator Michael MacDonald in the Hill Times.

Eastern Canada has a dependency on imported oil because the refineries located there are configured to process primarily light oil. Energy East is intended to facilitate the transport of diluted bitumen from Alberta’s oilsands so will not reduce eastern Canada’s reliance on imported crude to any significant degree.

But there is another source of dependency on imported oil that is rarely acknowledged. Oilsands producers are dependent on imported condensate as a diluent for bitumen blending purposes. This is because oilsands heavy does not flow down a pipeline unassisted — it’s too dense.

Canada does not produce enough condensate to meet oilsands producers’ demand. Since 2005, condensate imports from the U.S. have increased significantly. For every three barrels of increased oilsands production, a barrel of condensate is imported. Thus, as oilsands production expands, Canada’s import dependency expands with it.

So if we want to see a reduction in Canada’s reliance on foreign oil imports we must advocate for a reduction in oilsands production or an increase in upgrading and refinery capacity in Alberta. Otherwise, the minute bitumen is shipped along a pipeline, it generates a growing dependency on crude imports.

3) Canadian Oil Producers Are Not Truly Dependent on U.S. Markets

Some suggest that Canadian producers are somehow dependent on U.S. markets. The majority of Canadian producers are not “dependent” on the US. They have integrated refinery operations there. To a significant extent Canadian producers supply their own crude to themselves or their joint-venture partners as U.S. refiners.

When Suncor sells into its Commerce City, Colorado, refinery, or Cenovus supplies its facilities in Wood River, Illinois, and Borger, Texas, owned in a joint venture with Phillips 66, or Husky supplies its refinery in Toledo, Ohio, it owns in partnership with BP, or Imperial and its parent, ExxonMobile, deliver crude from their joint venture to ExxonMobile’s U.S. facilities, it is hardly accurate to suggest that they are “dependent” on the U.S. market.

4) Canadian Oil Is Not Selling at a ‘Discount’

Many argue that the U.S. “buys Canadian product at a deep discount,” but that’s incorrect. There is a natural price discount between U.S. oil and Canadian heavy oil that will always exist because of quality and transportation cost differences.

Oil is traded in U.S. currency. Canadian crude is priced against a benchmark to U.S. produced light oil; West Texas Intermediate (WTI). To examine the differential and whether there is a discount that is outside the expected natural range requires that we compare WTI to Canadian crude prices. To do this for oilsands crude is to look at the price for WTI as compared to the price for Western Canadian Select (WCS)—the highest grade of Canadian heavy.

The natural discount for WCS compared to WTI, according to the National Energy Board is about 30 per cent — or roughly $20 US per barrel. A price differential of WCS to WTI of less than $20 U.S. would therefore be considered a “premium” price for WCS. WCS has been trading at “premium” since 2014. Currently, the differential is only $14 U.S. a barrel.

Robyn Allan is an independent economist and was an expert intervenor at the National Energy Board Trans Mountain Expansion hearing.

Photo: Jon Olav Eikenes via Flickr

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Almost a full decade since first applying for a presidential permit, TransCanada looks set to finally receive go-ahead in the U.S. for its massive $8-billion Keystone XL pipeline.

But here’s the thing: U.S. approval, while a great leap forward for TransCanada, doesn’t guarantee the Keystone XL pipeline will ever be built.

U.S. President Donald Trump was elected with the explicit promise to get the 830,000 barrel per day pipeline from Alberta to Nebraska built, under the conditions that the U.S. would receive a “big, big chunk of the profits, or even ownership rights” and it would be built with American steel; his administration has already flip-flopped on the latter pledge.

*Update: On March 24, 2017, Trump granted Trans Canada the presidential permit required to build Keystone XL, saying: “It’s going to be an incredible pipeline, the greatest technology known to man, or woman."

So is Keystone XL going to be built? Not so fast. Here are three key reasons why it may never become a reality.

1) Economics

Even Enbridge CEO Al Monaco recently stated that Canada only needs two more export pipelines.

"If you look at the supply profile and you look at our expansion replacement capacity for Line 3 and one other pipeline, that should suffice based on the current supply outlook, out to at least mid-next decade," Monaco said on a fourth quarter earnings call last week.

Wood Mackenzie analyst Mark Oberstoetter seconded that: “There's not an evident need to get three or four pipelines built.”

Add to that the rapidly declining long-term prospects in the oilsands.

Those include Exxon’s writing off of 3.5 billion barrels in bitumen reserves, ConocoPhillips’ cutting of 1.2 billion barrels in reserves and Shell’s forecasting of global peak oil demand in 2021.

Just last week, Shell sold off almost all of its oilsands assets to Canadian Natural Resources Limited. This follows divestitures by Statoil and Total SA in recent years.

“There will be no more greenfield projects if the price of oil stays at what it is,” says David Hughes, expert on unconventional fuels and former scientist at the Geological Survey of Canada.

Hughes adds that Western Canadian Select already sells at a discount of around $15/barrel due to transportation and quality discounts.

Pipeline companies thrive on long-term contracts with producers, with lower rates for longer terms (such as 10 or 20 years).

Such contracts are huge financial gambles, especially given uncertainty about oil prices. In a low oil price scenario, oilsands take a hit because of the high cost of production.

“The economic case is not there for the three pipelines,” says Amin Asadollahi, lead on climate change mitigation for North America at the International Institute for Sustainable Development. “And should the massive expansion happen, I don’t think the financial benefits for the sector … would be there.”

Three Reasons Why #KeystoneXL May Never Get Built https://t.co/YirVu8lmaf #Keystone #tarsands #oilsands #cdnpoli #NoKXL @james_m_wilt pic.twitter.com/PsN64605vE

— DeSmog Canada (@DeSmogCanada) March 24, 2017

2) Landowners

We’ve already seen what lawsuits and protests can do to proposed oil pipelines, including crippling Enbridge’s Northern Gateway and seriously delaying Energy Transfer Partner’s Dakota Access Pipeline.

Same goes for Keystone XL. Lawsuits have plagued the company for years. In 2015, over 100 Nebraska landowners sued TransCanada over the proposed use of eminent domain; the company eventually withdrew from the case and its plans for eminent domain, but it appears such conflicts will reignite with the federal approval. Landowners have already started to meet to plot out how to resist the pipeline.

TransCanada requires a permit from Nebraska in order to proceed. Last week, two-thirds of Nebraska’s senators signed a letter petitioning the state’s Public Service Commission to okay the proposed route; the original route was altered in April 2012 due to public opposition.

Keith Stewart, climate and energy campaigner at Greenpeace Canada, says: “They’ll probably get the federal approval, but state-level and other legal challenges will go ahead to try to stop it.”

Adam Scott of Oil Change International notes that he expects a lot of resistance to the Keystone project on the ground in Nebraska, especially given that the project still doesn’t have a legal route through the state.

There’s also growing resistance from Indigenous people, especially in the wake of Standing Rock. Thousands of Indigenous people recently gathered in Washington, D.C. for a four-day protest against the Dakota Access Pipeline.

In 2014, the Cowboy Indian Alliance united potentially affected farmers and Indigenous people to protest against the Keystone XL project. The recently signed continent-wide Treaty Alliance Against Tar Sands Expansion specifically identified Keystone XL as a proposed pipeline to be stopped.

3) Environment and climate

Then there’s the fight north of the border over greenhouse gas emissions and climate obligations.

The Canadian government’s approvals of Kinder Morgan’s Trans Mountain and Enbridge’s Line 3 added a bit over one million barrels per day in potential capacity to the oilsands network.

Unless there are significant breakthroughs in technology to cut per-barrel emissions, those two pipelines alone will allow for oilsands production and associated greenhouse gases to hit Alberta’s 100 megatonne (Mt) cap; Stewart says companies have been talking about the possibility of emissions-cutting technologies such as solvents since 2007, but they still haven't materialized in a commercial setting.

Unconventional fuels expert David Hughes has calculated that if the 100 Mt cap is reached and a single LNG export terminal is built, Canada will need to cut non-oil and gas emissions by 47 per cent cut in order to meet the 2030 target, which will be impossible “barring an economic collapse.”

Adding an additional 830,000 bpd of export potential via the Keystone XL — allowing for the kind of expansion hoped for by the National Energy Board and Canadian Association of Petroleum Producers — could result in the breaching of Alberta’s emissions cap and the country’s climate targets.

Stewart points to Chevron’s recent submission to the Securities and Exchange Commission, which acknowledged the increasing likelihood of climate-related litigation as a related sign of looming danger for companies.

It’s a rapidly growing trend. Climate-based litigations are grounding fossil fuel projects around the world. A lawsuit based on constitutional rights to a healthy environment filed on behalf of 21 children during the Obama administration threatens to bring a similar precedent to the U.S.

“We’re actually looking at a variety of ways to put pressure — including possible legal challenges — on companies that are basing their business model on the failure of the Paris Agreement,” Stewart says. “If you’re telling your investors, ‘We’ll make money because the world will not act on climate change’ are you actually engaging politically to try to produce that outcome? Are you lobbying against climate policy?’ ”

Photo: Tarsands Action via Flickr

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At a speech given to the Calgary Chamber of Commerce, Canada's Prime Minister Justin Trudeau said he intends to work with President-elect Donald Trump to approve the northern leg of TransCanada's Keystone XL pipeline. 

The speech comes as Trump revealed in a recent interview with Fox News that one of the first things he intends to do in office is grant permits for both Keystone XL and the perhaps equally controversial Dakota Access pipeline. Because Keystone XL North crosses the U.S.-Canada border, current processes require it to obtain a presidential permit from the U.S. Department of State, which the Obama administration has denied.

The next State Department, however, could be led by the recently retired CEO of ExxonMobil, Rex Tillerson, who was just nominated to be U.S. Secretary of State and soon will face a Senate hearing and vote. Potentially complicating this situation is the fact that Exxon holds substantial interest in both tar sands projects and companies, which stand to benefit from the Keystone XL pipeline bringing this carbon-intensive crude oil across the border.

Exxon, along with its subsidiary Imperial Oil, owns both the Kearl Oil Sands Project and Cold Lake tar sands production facilities, and a 25 percent stake in the tar sands production company Syncrude.

According to Bloomberg, Trump's team has shown interest in getting rid of the Executive Order which created the presidential permit process altogether, which President Barack Obama and Secretary of State John Kerry used in November 2015 to axe the pipeline. 

On the campaign trail and during his post-election "Victory Tour," Trump has pledged to rescind all of Obama's Executive Orders. Unsurprisingly, Tillerson has stated his support for Keystone XL, as well.

As reported in a recent investigation by InsideClimate News, nearly a third of Exxon's global reserves is situated in Alberta's tar sands, an oil patch which covers about 55,000 square miles, or roughly the size of New York state. Alberta's tar sands represent the third largest oil reserves on the planet.

Image Credit: InsideClimate News

Processing and producing tar sands crude emits roughly 17 percent more carbon into the atmosphere than conventional crude oil, according to State Department figures cited by InsideClimate News. Exxon's website says that by 2040 the company will provide a quarter of the oil for the Americas via the tar sands.

It remains unclear what Tillerson will do pertaining to the 1.7 million shares of Exxon stock which will be deferred to him — "unvested," in corporate lingo — over the next decade or so. Some industry experts have called for him to either receive his stock payments immediately or divest completely in order to avoid the associated conflict of interest as Secretary of State.

"Keystone XL Clone"

Keystone XL North links Alberta's massive tar sands reserves to the oil hub mecca of Cushing, Oklahoma. From there, it connects with the southern leg of Keystone XL — now known as the Gulf Coast Pipeline — which carries the diluted bitumen (or "dilbit," the result of tar sands oil being mixed with lighter petroleum products to allow it to flow more easily) to Gulf coast refinery markets. 

Trudeau also recently gave a permit to the oil company Enbridge for its Line 3 Pipeline, which likewise crosses the U.S.-Canada border. That line to the Great Lakes connects to what DeSmog has called the broader "Keystone XL Clone" pipeline system, which like the Keystone Pipeline System, links Alberta's tar sands to Gulf Coast refinery markets. 

The southernmost piece of this Keystone XL Clone system, the Seaway Pipeline, which runs from Cushing to Gulf Coast refineries, had a spill in late October.

"Bring It On"

Even with the deck now stacked against those who have spent years fighting against Keystone XL, at least one environmental group responded with a simple message: "Bring it on."

"Keystone XL would imperil countless communities as well as our climate, and President Obama was absolutely right in finally rejecting it last year," Oil Change International's David Turnbull told the publication Common Dreams. "The movement to stop Keystone is one of the most inspiring and powerful collections of landowners, ranchers, Native Americans, and concerned citizens all across the county that we've ever seen. If Trump tries [to] undo President Obama's wise decision, this movement won't be standing idly by. In other words: Bring it on."

Photo Credit: Wikimedia Commons

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TransCanada received permission from federal regulators to re-start the Keystone Pipeline a week after a 16,800-gallon spill in South Dakota. The pipeline started back up on Sunday morning at a reduced operating pressure.   The incident has given ammunition to a group appealing the decision by the South Dakota Public Utility Commission (PUC) to re-certify TransCanada’s permit to build the Keystone XL Pipeline, despite President Obama’s denial of a permit needed to cross international borders.    The PUC reasoned that the next president could decide to issue the permit — a reminder that TransCanada has not given up on building the northern route of the Keystone XL. However, this most recent spill renews questions about the company’s ability to build safe pipelines.   When Evan Vokes, a former TransCanada materials engineer-turned-whistleblower, heard about a small spill along the Keystone Pipeline, he guessed that the leak would be found at a transition weld near where the pipeline crossed under a road. Transition welds connect thinner-walled pipe to thicker-walled pipe.

Places where the pipeline goes under road crossings require thicker pipe than the rest of the line, so wherever the Keystone goes under a road you will find transition welds, Vokes explained.    It turns out that Vokes’s prediction was right. In a corrective action order notice issued to TransCanada on Saturday, the Pipeline and Hazardous Materials Safety Administration (PHMSA), the agency that regulates interstate pipelines, indicated the probable cause of the leak was from a girth weld anomaly at a transition site. 

Vokes warned his former employer and PHMSA about the transition welds, which he described as “inherently risky.” Welding different thicknesses of pipe together is harder to do than welding the same thickness, and it is more difficult to get accurate X-rays of welds.   “Even a seasoned welding inspector could miss imperfect welds when reviewing X-rays used to check the welds during the pipeline’s construction,“ Vokes told DeSmog. “And any less than perfect weld is more prone to crack when the pipeline moves, which happens when weather conditions change.”   Vokes felt so strongly about the risk of leaky transition welds that he sent an email to TransCanada’s CEO Russ Girling, warning that the transition weldsused on the Keystone Pipeline were a bad idea.   He pointed out to Girling that TransCanada was ignoring an advisory PHMSA issued in 2003 that warned against the use of such welds because they are prone to crack under stress.   He also emailed Kenneth Lee, a top PHMSA engineer who ran a workshop on “Pipeline Construction Challenges” in 2010, to inform Lee of his concerns.    Diagram of an improper weld transition part of a PHMSA presentation.   Lee responded by email: “We are in full support of efforts and technologies to improve pipeline safety, including many of those you have mentioned. The increased incidents of girth weld cracks are of great concern to us and we treat this very seriously.”    But Vokes believes his warning to Lee was ignored because no corrective actions were taken against TransCanada during the pipeline installation to stop the transition welds.   ”Bad welds can result in a catastrophe, “Vokes explained to DeSmog. “A tiny crack in a weld can leak for years before it is found, because leak detection systems are only capable of detecting leaks when a pipeline’s volume drops by two percent in the course of a day.”   TransCanada’s detection system didn’t pick up the leak near Freemont, South Dakota, allowing the pipeline to spill at least 168,000 gallons of dilbit (refined Canadian tar sands oil) before a landowner noticed the spill.   It is impossible to say how long the pipeline was leaking, or how long it could have gone on leaking, had the spill taken place in a more remote area.    “There could be hundreds of cracks in welds along the Keystone Pipeline and TransCanada’s leak detection system wouldn’t locate them,” Vokes said. "The Enbridge Pipeline spill in Kalamazoo, Michigan, leaked twice as much dilbit before anyone noticed.”   The mounting failures of various TransCanada pipelines does not surprise Vokes because “the company often did not follow the code of construction.”    But he is surprised and dismayed that, when pipeline safety is at stake, regulators in Canada and the United States allow companies to continue to break the rules with few to no consequences.    Two other TransCanada projects that failed not long after they started operating are the Bison Pipeline in Wyoming, and the North Central Corridor Loop in Alberta, Canada, validating Vokes’s claims.   Vokes was fired by TransCanada before most of the changes he advocated took place. PHMSA did issue a corrective warning to the company related to the construction of the Keystone Pipeline, but it was for issues that did not include the transition welds.    Vokes believes that pipelines would be safe if the rules of construction were followed. But he is aware that the rules were broken repeatedly here.   While reviewing photos that Cindy Myers, a member of the Dakota Rural Action group, took near the spill site, Vokes noticed a person on the pipeline right-of-way carrying a firearm. “Firearms are not permitted on a pipeline’s right-of-way,“ Vokes said. “This shows that the company and the regulators are not taking pipeline safety seriously. To ignore safety rules even when the public is present shows a total disregard of public safety." 

Man with reflective safety vest carrying a gun at the site of the Keystone spill in South Dakota 4/4/2016. Photo courtesy of Cindy Myers   Gary Dorr, a member of the Nez Perce Tribe, told DeSmog that TransCanada also ignores laws that say Indigenous peoples must be consulted before pipelines cross a tribe’s land. He is one of the legal challengers that includes members of the Dakota Rural Action, the South Dakota Keystone Consolidated Interveners, and several individual landowners who are challenging the South Dakota PUC’s decision to re-certify TransCanada’s permit. “The Keystone XL, if built, will cross tribal land without permission given to TransCanada by the tribes,” Dorr said.   The challengers filed an appeal against the PUC’s decision that is pending. ABC-TV affiliate KSFY in Sioux Falls, South Dakota, reported that the “circuit court judge in Pierre is expected to issue an order on consolidating the lawsuits against the PUC into one appeal next week.”   Dorr hopes this spill will make a difference in the court’s decision. “We were promised TransCanada’s pipeline won’t spill,” he told DeSmog, “and that is a promise that the company cannot keep.”   The PHMSA corrective order calls for more oversight on the Keystone Pipeline.   But Vokes told DeSmog, “The only way to find out if there are other slow leaks would be to dig up the pipeline everywhere a transition weld was made. There easily could be hundreds of undetected leaks in that pipeline.”

  Photo credit: Keystone Pipeline spill site in South Dakota, courtesy of Bold Nebraska.

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TransCanada’s claim that the southern route of the Keystone XL Pipeline is the safest pipeline ever built in the United States is challenged by the release of new documentation confirming multiple code violations.   Daily inspection reports on the construction of the pipeline obtained by the Tar Sands Blockade, an activist group, renew questions about the pipeline’s integrity. Mounting evidence that the pipeline was not built to mandated minimum requirements established by the American Petroleum Institute increases the chances the pipeline will leak or experience a catastrophic spill.    The reports — prepared by federal regulators with the Pipeline and Hazardous Materials Safety Administration (PHMSA) — reveal some code violations not previously disclosed. The number of reports also account for less than half the number of days the agency claims it spent inspecting the pipeline while it was being constructed.   Last year President Obama denied TransCanada a permit to build the northern route of the Keystone XL pipeline across the U.S.-Canada border.But his administration had fast-tracked the construction of the southern leg of the project in 2012.   The Keystone XL's southern route, renamed the Keystone Gulf Coast Pipeline when the project was split into sections, goes from Cushing, Oklahoma to the Gulf Coast. In Cushing, the pipeline connects to TransCanada’s pipeline network that originates in Alberta, Canada.   After mandatory safety tests revealed potential problems with the integrity of the southern pipeline, TransCanada dug up 130 sites and made repairs before the pipeline was permitted to start up.   PHMSA noted in its final inspection report that 37 sections of pipe had to be cut out and replaced and many areas of the pipeline’s coating had to be repaired.   The Tar Sands Blockade, Public Citizen, and landowners living along the pipelines path monitored the repair work. They were joined by Evan Vokes, former TransCanada materials engineer-turned-whistleblower, who shared his technical expertise.   They requested PHMSA require TransCanada do a new pressure test on the pipeline to test the integrity of the repairs. But PHMSA turned them down at a private meeting held shortly before TransCanada started up the pipeline.    PHSMA explained that it had faith the repairs were done correctly and assured the group that its inspectors spent over 150 days inspecting the pipeline during construction — overseeing welding, coating, installation, backfilling, testing and all other construction activities.   That claim prompted Kathy Redman, a member of the Tar Sands Blockade, to file a request under the Freedom of Information Act (FOIA) for the daily inspection reports. In total 66 reports were released covering 70 days.   Of those reports, two recount a PHMSA inspector aborting his mission after being warned that protesters would be at the site he planned to inspect. Another recounts an inspector sitting in on a safety training session with contractors and interviewing personnel.   “Inspecting pipeline construction is a boots on the ground activity,” Vokes told DeSmog. “Any time not spent on the pipeline right of way cannot be considered time spent inspecting construction.”   Vokes believes it would have been prudent for regulators to spend as much time as possible monitoring the construction of the pipeline. TransCanada has been cited on more than one occasion by regulators in the U.S. and Canada for not complying with construction code.     A couple of the company’s latest projects blew up, not long after they started operating, including the Bison Pipeline in Wyoming and the North Central Corridor Loop in Alberta, Canada.   DeSmog asked PHMSA if it had documentation to prove more than 150 days were devoted to inspections.   “There would not necessarily be 150 reports for 150 days, and we’ve been trying to find another way to explain that,” an email sent to DeSmog by a PHMSA director stated.**   But PHMSA’s final inspection report for the Gulf Coast pipeline states, “Daily reports were submitted by each engineer/inspector to document the daily construction activities observed during the inspections.”  It also says that “A total of 165.9 AFO [away from the office] days and 53.35 non-AFO days were spent on the TransCanada construction project.”

“The discrepancy in the number of days the agency claims it spent inspecting to the number of daily inspection reports makes me doubt PHMSA’s credibility,” Redman told DeSmog. The reports she did get added to her concern that the pipeline is a disaster waiting to happen.   The reports include inspectors’ observations of TransCanada violating construction codes. A report dated 10/30/2012 describes a welder who had the wrong welding rods in his bucket.   “That is a fundamental fuck-up,” Vokes told DeSmog. “It could explain the high number of welding failures the pipeline suffered.”    A welding inspector is required at all construction sites during pipeline installation. Using the wrong welding rods leads to bad welds, and bad welds can lead to slow leaks.   “The welder and the welding inspector should have been fired on the spot,” Vokes said.    Vokes found it troubling that the inspection report makes no mention of PHMSA’s inspector taking immediate corrective action. He believes stopping construction after discovering the wrong rods in a welder’s bucket would have been an appropriate response.   In another PHMSA inspection report, dated 7/09/2013, TransCanada’s pipeline coating problems are noted.  At a dig site where the company was assessing issues detected by a safety test, the inspector found damage done to the coating caused by a shovel.   Previously released warning letters PHMSA sent to TransCanada reprimand the company for hiring unqualified welders and not protecting the pipeline’s coating during installation. And PHMSA’s final inspection report reveals TransCanada received unsatisfactory marks on welding procedures and installation practices related to the pipeline’s protective coating.   PHMSA did not fine TransCanada for any of the violations it cited in warning letters or require a second pressure test after TransCanada repaired the pipeline, although it has the regulatory power to do so.

A repaired pipeline segment on the Keystone Gulf Coast Pipeline. Source: PHMSA FOIA 2016-0041_000077   ”You can’t expect the pipeline to be safe if the basic rules of construction aren’t followed,” Vokes said.  “’Get the bitch in the ditch’ is the best way to describe pipeline construction these days. Speeding up the construction process makes no sense because it is a lot cheaper to do things right in the first place.”   Because pipeline regulators in the U.S. and Canada are not using the full force of their regulatory power, Vokes points out, operators have little reason to change their ways.    Redman is skeptical she was provided all of the documents she requested.  Regardless, the 66 reports she was able to obtain confirm her belief PHSMA didn’t spend an adequate amount of time acting as a watchdog of a company with a questionable safely record.    “Anyone who relies on a safe water supply along the pipelines route should be concerned,” she said.   PHMSA Daily inspection Reports Obtained by the Tar Sands Blockade in 2016   PHMSA Daily inspection Report Obtained by the Tar Sands Blockade in 2014

**Ed note: After publication of this article, a PHMSA public affairs specialist emailed DeSmog this statement: "The daily reports are essentially notes the inspector uses to document their observations over the course of the investigation. Our inspectors use them to complete the final construction report and don’t necessarily keep them once the final report is complete." 

Image credit: Julia Trigg Crawford at a TransCanada construction site across from her farm in Sumner, Texas, on Oct. 14, 2012. She tried to stop TransCanada from taking her land but was unable to prevent the company from using eminent domain. ©2012 Julie Dermansky

The Narwhal’s reporters are telling environment stories you won’t read about anywhere else. Stay in the loop by signing up for our free weekly dose of independent journalism.

Only three-and-a-half months have passed since the federal election, but fossil fuel companies and lobby groups haven’t wasted any time in ramping up their lobbying efforts.   Suncor, the country’s largest energy company by revenue, has led the pack in meeting with high-ranking federal officials — logging at least 12 meetings in just over one month.   Between Nov. 2 and Nov. 19 the dominant oilsands player met four times with Louise Metivier, who was Canada’s chief negotiator at the UN climate summit held in Paris between Nov. 30 and Dec. 12.   Steve Williams, the company’s CEO and head lobbyist, also met three times with Environment Minister Catherine McKenna (on Nov. 18, Dec. 7 and Dec. 8) another three times with Environment Canada’s chief of staff Marlo Raynolds (on Nov. 5, Dec. 7 and Dec. 9) and twice more with Gerald Butts, Prime Minister Justin Trudeau’s right-hand man and principal secretary ( Nov. 18 and Nov. 19).   “The meetings were preparatory meetings for Suncor’s participation at COP 21 in Paris,” explained Sneh Seetal, spokesperson at Suncor, via e-mail. “Our president and CEO, Steve Williams, attended as a member of the Canadian delegation at the invitation of the federal government. We discussed Suncor’s perspectives on climate change and how industry can help be a part of the solution.”

Lobbyists Include LNG Canada and TransCanada

Other oil and gas interests have displayed similar determination since the Liberals formed government.   Take LNG Canada Development (a Kitimat-based joint venture composed of Shell, PetroChina, Korea Gas and Mitsubishi), which met with Erin O’Gorman, assistant deputy minister of Natural Resources Canada, on Oct. 27, Nov. 5 and Jan. 8.   TransCanada, the proponent of both the Energy East and Keystone XL pipelines, lobbied Canada’s ambassador to the United States, Gary Doer, three times on Oct. 30.

The Canadian Energy Pipeline Association met with NEB chairperson Peter Watson on Nov. 2 and Dec. 17. And the Petroleum Services Association of Canada lobbied McKenna, Finance Minister Bill Morneau and Employment Minister MaryAnn Mihychuk in separate meetings on Dec. 22.

It’s important to keep in mind that the lobby registrations are likely just scraping the surface of the actual lobbying happening in Ottawa.   Richard Girard, executive director of research centre Polaris Institute, notes that only employees who spend more than 20 per cent of their month’s work on lobbying efforts are required to register as a lobbyist. As a result, Girard suggests there are “lots of meetings that are more likely taking place that we don’t know about.”   Even the meetings that are registered lack specifics, only hinting at general subjects such as “environment” or “energy.”   “It certainly provides you with a list of who’s seeing who, which is helpful,” says Gillian Steward, author of the Toronto Star’s 2015 Atkinson Series on public policy on the oilsands. “They do have to at least put down the topic of what they’re talking about. On the other hand, it can be very difficult to get — say, from CAPP — exactly what they’re presenting.”

Bear Head LNG Lobbies Federal Government 15 Times in 10 Weeks

Some companies have clearly been making plenty of moves, with Bear Head LNG — the company proposing to build a liquefied natural gas facility in Nova Scotia — meeting with Doer on Oct. 21, Oct. 26, Oct. 30, Nov. 10, Nov. 11, Dec. 10 and Dec. 18.   Represented by former U.S. ambassador Derek Burney, the company also lobbied the duo of Jay Khosla (assistant deputy minister of Natural Resource Canada’s energy sector) and Terence Hubbard (director general of Natural Resource Canada) four times between Nov. 12 and Dec. 29, with Khosla chatting individually with the company an additional four times in the window.

‘It’s a Question of Balance’

Girard notes that while the Canadian lobbying registry has improved over the years, it’s still flawed because it doesn’t show how much companies are spending on lobbyists, unlike the U.S. But reasonable conclusions can still be made.   “The number of times people register communications increases around certain important pieces of legislation,” says Girard, who served as co-author for the Polaris’ report Big Oil’s Oily Grasp. “Many of those pieces of legislation were very positive for the industry. We can’t draw the line, but yes we can see there’s a correlation between the level of lobbying — who’s lobbying and for what — and the outcome of the legislation.”   The Polaris Institute’s 2012 report found that that 2,733 lobbying communications were made by oil and gas companies between July 2008 and November 2012, far outweighing similar efforts by mining and forestry interests. Prominent lobbying organizations such as the Canadian Association for Petroleum Producers (CAPP), TransCanada, the Canadian Gas Association, Imperial Oil and Suncor led the way. Meanwhile, only 11 environmental non-governmental organizations were registered as lobbyists in that window.   “It’s a question of balance,” Steward says. “[Oil and gas companies] have a right to go and do that. It’s just that they have more resources and more power to actually have those meetings, where environmental and First Nations groups and other kinds of NGOs don’t have the funds or staff, and aren’t represented as well. It’s much harder for them to actually get their message across to the people who influence those decisions.”

Image: Steve Williams takes the helm as Suncor CEO in 2011.  

The Narwhal’s reporters are telling environment stories you won’t read about anywhere else. Stay in the loop by signing up for our free weekly dose of independent journalism.